Even as your enthusiasm about finally making some money in your home based business is beginning to build, in the back of your mind the nagging worry about the tax ramifications that your sudden income will generate cannot be denied. Sure, you probably read up on tax liabilities, but more than likely with an eye to tax deductions rather than self-employment tax.
Self-employment tax rules for the fiscally challenged are by no means all-inclusive, but they do provide a good rule of thumb that helps you understand how much of a hit you can expect Uncle Sam to take. When you are in business for yourself this is very important information to have and understand.
Many a myth has sprung up around self-employment taxes, but in essence they are little more than your paying into the social security and also Medicare funds. In the past, you saw these deductions on your paychecks.
At this point in time, your self-employment tax rate ? regardless of income below $94,200 ? is set at 15.3%.
A much-overlooked rule dictates that you are supposed to pay your estimated self-employment tax throughout the year. This is true especially when you find at the end of the last year that you owed taxes ? of any kind ? exceeding $999. Estimated tax payments may be made during the year and thus will ease the hit you may take at the end of the year.
Interestingly, if you just started out with your home base business, you might be able to get away with not paying self-employment tax, if your net income was at or below $399. At this point it is still considered hobby income and will not be subject to the tax.
If in doubt, you will be wise to invest some time and money and visit with your friendly neighborhood accountant who should be able to give you some tips as to what you might have to look forward to when the taxes come due. In addition to the foregoing, investing the time now and discussing monies owed as well as allowable expenses with your tax professional will prevent you from claiming ? or attempting to claim ? deductions for which you either do not qualify or only have a limited and conditional claim.
Those who are truly fiscally challenged usually opt to have a tax preparer handle their business taxes at least during the first year so as to ensure that each and every schedule is included, the majority of deductions makes it into the return, and a good starting record is established that may serve as an example for the coming year when the entrepreneur might try to go it alone. Since the money you spend on a professional tax preparer is deductible, it is indeed a wise expense!
As you can see, the self employment tax is not really something to be dreaded and feared, but it is a tax that must be paid and when you fail to make estimated payments throughout the year, you will find that the end of the year hit may be especially hard to take.
Calculate Self Employment Tax
To succeed as a freelancer, contractor or a new business owner, you have to have determination, passion and patience, much of the same characteristics you need to successfully hunt for a new job. So why is self-employment on a resume a concern for your potential employer?
Listing self-employment on your resume when looking for full-time job can raise questions for your potential employer. They will ask questions such as:
1.Were self-employed because you were in between jobs, or because you wanted to start your own business rather than work for a corporation?
2.Are you still working on your own, as a freelancer or a consultant? If so, do you intent to continue this work in addition to your full time job?
3.Is your self-employment presenting a conflict of interest for the company?
4.Are you working as a freelancer or a contractor on part-time basis, and never intend to have this replace full-time employment?
5.Does your long-term career goal include owning your own business?
All of these questions are valid from your potential employer's point of view. Companies do not want to hire you, train you and provide you with benefits only to have you quit after a year to start your own business.
This is the main reason previous or current self-employment raises red flags for the hiring organizations. The best way to address any self-employment on your resume is to highlight the positives of working as a freelancer or managing your own business. It is important that your resume includes employment history that is honest and relevant to your career goals.
If you pick up a freelance project infrequently and do not intend to make this a full time career, you can omit any such experience from your resume. The only time you would list occasional freelance work on your resume is if it allows you to fill any gaps in your professional experience.
If you have worked as a contractor for a period longer than three months, or if you have ever owned your own business, it is important that you indicate that on your resume. Highlight those attributes of the job experience that qualify you as a perfect candidate for the job that you are seeking.
Your job responsibilities should be listed in the same way as they are for any other full-time job you've held; focus on those responsibilities which best meet your career objective and quantify your achievements when possible.
Exemplify your self-starter attitude under the Qualifications section of your resume. Make sure to list any employability skills you have acquired or strengthened while you were self employed.
As a final indication of your commitment to the job you are seeking. Make sure that your cover letter or email addresses anticipated concerns of your potential employer. Make references to anything on your resume that may raise questions.
If you still own your own business, but are looking for full-time work, for example, make sure to let your employer know what your long-term professional goals are and how you intend to balance your roles at both businesses.
Don't apologize for being self-employed. Your resume and cover letter should present you as a credible and passionate professional. Focus on the positive experiences and skills you have acquired as a freelancer, and make sure to let the employer know how these will benefit the company if you are their chosen candidate.
Both Ernest Johnson & are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Ernest Johnson has sinced written about articles on various topics from tax, Computers and The Internet. To find the best home based business ideas and opportunities so you can work at home and to learn more about this topic, Ernest Johnson recommends you visit:
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